Publilius Syrus (~ 100)
"Everything is worth what it's purchaser will pay for it."
Much like in real estate, the current value of an automobile is equivalent to its resale value. Savvy real estate investors look to get out before changes in the market saddle them with properties no one wants, forcing them to absorb those costs as losses. Recently, grim economic headlines and a presidential campaign brought these simple money principles into sharper focus for the American people.
A refresher course on this lesson looms on the horizon for an auto manufacturer that has, in the eyes of some, coasted for too long on the reputation of a product that far exceeds its value. It seems that the lesson so many wanted the American auto industry to learn is about to be forced upon its toughest competitor. Toyota’s recent announcement that it will be adding eight models to a product recall that only last week was expanded to five million vehicles, has Toyota owners suddenly looking for their own bailout plans.
Even the vaunted Prius, once the floor model for everything that Detroit hasn’t bothered to get right, is barely making a move off the lot in the wake of Toyota’s massive safety recall. Amid angry questions as to why this has been allowed to happen, apologies, excuses, and the ever-present spin factor attributed to any issue with political weight are being hurled against the wall to see what sticks.
After recalling an additional 2.3 million vehicles (bringing the total number of recalled Toyota automobiles to 5.3 million) Toyota sent out a mass mailing to over 2 million customers expressing that they were ‘truly sorry’ for the inconvenience, one of many countermeasures in the public relations drama that has unfolded over the past few weeks.
Toyota Motor Sales President Jim Lentz said that he believed his company’s vehicles to be safe. During an interview on ‘The Today Show’, Lentz said, “I drive Toyotas; my family members drive Toyotas. My friends and neighbors drive Toyotas. I would not have them in products that I knew were not safe.”
Toyota’s top-ranking U.S. sales executive has his work cut out for him if he intends to head off this latest turn of events that all but the most optimistic observer would label a disaster. Given the seriousness of the safety issue attributed to Toyota vehicles, consumer groups have begun mobilizing public opinion towards determining who’s at fault and while the Big Three capitalize on Toyota’s misfortune, everyone else involved seems to be primarily interested in avoiding getting caught in the fallout.
Toyota’s public image in America hinges on the soft assumption that the company is, technologically speaking, far out in front of its American counterparts. The way the aforementioned Prius has scorched the competition in past years has largely been based on better fuel mileage but even as other manufacturers ‘caught up’ and closed the gap in fuel efficiency, sales held strong for Toyota due to strong public image and unshakable consumer loyalty, an advantage Detroit hasn’t managed to boast since the 1970’s.
Fully aware of what a slip in American consumer loyalty would mean in these economic times, Toyota has tried to get out in front of this nightmare at every turn. Unfortunately for Toyota, their trademark ‘market awareness’ seemed not to extend to customer safety. When asked why dealerships continued to sell defective vehicles after the recall was announced, Toyota pointed out that they only did so for three days. When asked why production of those vehicles continued even after the recall was announced and affected vehicles sat frozen on dealership lots, Toyota announced that they would be restarting production to ‘fix’ the problems present in the more than five million recalled vehicles as early as next week.
Not only Toyota, but the U.S. Government is being brought to task for the lax oversight regarding such a serious safety issue. In a report sent to NHTSA on Jan. 21, Toyota said that in 2007 it received reports of pedals in Tundra trucks that felt rough or were slow to return to the idle position. Toyota insisted that it was the floor mats that were the cause of the problem. Now under increasing scrutiny with regards to whom knew what and when did they know it, the Obama Administration is pushing for more NHTSA investigators.
For most, the nature of the recall is suspicious. In September, Toyota initiated the largest automotive recall in American history in order to address issues of ‘unintended acceleration’ related to floor mats or other foreign materials. These issues, which Toyota claims are unrelated to the current ‘unintended acceleration’ problem attributed specifically to the gas pedal, have been reported for years and consumer groups are clamoring for an investigation as to whether or not Toyota intentionally misled U.S. agencies pertaining to the safety of their vehicles.
In preparation for what will undoubtedly be an embarrassment for the Obama Administration and its ambitious plan to thrust the U.S. more deeply into the global economy, the White House has announced a budgetary increase of $4 million to the existing NHTSA enforcement budget of $18 million. While the increase is below the level of inflation, it is not known whether the 66 employees slated for hire will be assigned to automotive recalls or other agency duties.
The Big Three haven’t allowed this opportunity to slip past unnoticed. Capitalizing on global markets the way Obama’s task force told them to, GM is selling its once-unwieldy Hummer brand to Chinese heavy equipment maker Sichuan Tengzhong Heavy Industrial Machinery Corp. Once the symbol for middle-class excess, GM expects the sturdy Hummer to be a valuable asset as China continues to move from an agricultural economy to an industrial one. With sales of the Hummer stagnant stateside, GM has found perhaps the most ideal buyer for its least popular brand.
Forged in the war fires of WWII, the Jeep brand has outlived all of its owners and while Chrysler may prove to be no exception, the automaker has shown its wisdom in placing its latest stake on the brand. Plans to invest in and expand the Jeep lineup should combine well with Fiat’s ability to deliver fuel-efficient small cars. That should deliver the fuel-efficient small car that Chrysler needs to compete with the Focus stateside and, considering that Jeep already accounts for 43 percent of Chrysler’s international sales, it’s a smart move to stay competitive globally.
Finally Ford, following General Motors example and kicking Toyota when they’re down, has announced an incentive program targeting people who own Honda, Acura, Toyota, Lexus or Scion vehicles that are 1995 models or newer. Ford says this incentive will ‘stack’ with other incentives and the program will run through March 1.